RBI can cut rate if inflation stays below 6%: Rajan

"We will cut rate when we see that even after the rate cut, inflation will remain below 6 per cent," Rajan said. RBI expects retail inflation to be around 6.1 per cent in January-March, 2016.PTI | August 05, 2015, 23:28 IST

Since January, RBI has reduced key lending (repo) by a total of 0.75 per cent in three tranches.

He said there is perception among people that inflation is rising because of increase in prices of milk and vegetables, which is "worrying".

Retail inflation stood at an 8-month low of 5.4 per cent year-on-year in June compared with 5.01 per cent in May. RBI tracks CPI, or retail inflation, in deciding its monetary policy action.

On the impact of a likely hike in interest rate by US Fed, Rajan said initially there could be volatility and flight of capital, but investors will return as prospects are good in India and it provides a "stable" investment option.

On growth prospects, Rajan said the current fiscal is expected to end with a growth rate of 7.6 per cent, which is a "strong growth".

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